In sync with recent funding rumours regarding Flipkart’s next and perhaps its final round before an IPO, the Indian e-commerce poster boy has secured a massive $700 Million round, with existing investors including Steadview Capital participating in the fundraise, reports ET.
The fresh round, as per earlier speculations, would be used primarily to fund Flipkart’s heavy discount model which it’ll bring in during the upcoming festive second half of the year. This round comes at a time when Amazon announced a gargantuan $5 Billion sum to beef up its India operations, which have reportedly already hit the $1 Billion GMV mark.
Snapdeal too, is reportedly looking to raise a similar high-profile round, though its valuation has become an issue for the investors, as per earlier reports.
While Flipkart’s fund-raising in the past has always been a notch above its competitors, it still continues to face stiff competition from homegrown rivals like Snapdeal, PayTM and foreign brands like Amazon with Alibaba too jumping into take a pie of India’s $600Billion e-commerce market.
Interestingly, it could be PayTM this time, and not Snapdeal which might prove to be a tougher opponent to beat for Flipkart.
PayTM is looking to raise an additional $600 Million round from its existing investor Alibaba, by increasing the Chinese behemoth’s stake to 40% in the company. This, including the previous $575 Million it received from Alibaba, will take PayTM’s fundraising to the north of a staggering $1 Billion, putting it head-to-head with Flipkart in terms of cash reserves.
Flipkart however has its own worries. Its customer support continues to be at the receiving end from the customers, for shipping in stones, mangoes and what not, in place of products. Moreover, investors are now varied of its bubbled up valuation, which has been pegged to its $4 Billion GMV — which again, is a very unstable figure.
To reduce pressure, Flipkart has come up with new, high-margin categories such as furniture, homes and travel booking, which it expects will boost its annual sales in terms of retail price (gross merchandise value, or GMV) to $10-12 billion in 9 months to a year.
However, these categories continue to have their own niche e-commerce brands in this highly cluttered segment. PepperFry and Urban Ladder for example, both in the online furniture business, have secured funds over $100 Million and $50 Million respectively.
India’s e-commerce market, as it matures, is becoming an interesting battlefield, not on innovation anymore, but on the back of huge capital. Let’s see how this pans out. In the meanwhile, we have contacted Flipkart for this report and will update the story once we receive a statement.